Firms are still hiring but with average weekly hours being curtailed, aggregate hours worked appear to have peaked in Q4.
Why It Matters: Talk of a soft landing has intensified, but the data paint a different picture. Real spending peaked in Q1. Housing starts in Q2. Industrial production in Q3. Payrolls are still expanding and layoffs are near historically low levels. Given the structural imbalance between unfilled jobs and unemployed workers, those metrics are unlikely to be useful indicators of what lies ahead for the economy. Don’t even start with the unemployment rate, which has long been considered a lagging indicator. Rather than firing workers who were hard to hire in the first place, firms are keeping their payrolls largely intact. They are responding to softening demand by curtailing hours worked. Payrolls and initial jobless claims are noise in this environment. The news is that the economy is weakening, inflation is lingering, and the Fed is still raising rates.
